Question
Maya owns a business which offers outdoor services including guided hikes and kayaking lessons. Demand for her services fluctuate depending on the season. The busy-season
Maya owns a business which offers outdoor services including guided hikes and kayaking lessons. Demand for her services fluctuate depending on the season. The busy-season (warmer weather) lasts for approximately 9 months each year. During the busy-season the market price for her services average $60/hour while in the off-season it is only $35/hour. Her average total cost is $40/hour and average variable cost is $30/hour. Which of the following is true?
She should exit the market because she makes negative profits. | ||
She should shut down during the off-season since her average total cost is greater than price. | ||
She should shut down during the off-season since her price is less than average variable cost. | ||
None of the above |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started